SOUTH AMBOY, NJ – Mission statements, core values, guiding principles – great material for business books. But in the real world, they often are little more than corporate-speak from executives with little else to say.

For Shau-wai Lam, however, it is the stuff of which great companies – and dealerships – are made.

For more than 30 years Lam, a Chinese immigrant, has used mission statements, principles and values to mold a modest American subsidiary of a Hong Kong-based trading company into one of the top-selling automotive dealer groups in the world.

Lam is the president and CEO of the DCH Auto Group and the 2005 Ward's Dealer of the Year. It is the latest in a string of personal awards recognizing him for superior leadership and generosity in the automotive retail industry.

His company surpassed $1.5 billion in revenue last year, and in the previous two years, 26 of 28 eligible DCH dealerships earned J.D. Power and Associates awards.

Shau-wai Lam

Lam handles the praise and recognition of his peers with both graciousness and reluctance. He credits the success of DCH to his colleagues and the support of its shareholders and vendor partners.

Honoring him for receiving the 2004 National Assn. of Minority Dealers' lifetime achievement award, Jim Appleton, the director of the New Jersey Coalition of Automotive Retailers, recounts how Lam was hesitant to accept a nomination for the 2004 Time Magazine Quality Dealer Award.

“It took me a little time to convince him to accept,” Appleton says. Lam finally relented, figuring such honors recognize the entire company, not just him.

Marc Burt, manager-minority business development for American Honda Motor Co., says of Lam: “You could be in a room with him for a long time and never know who he is and all of the things he has accomplished.”

Interviewed at his headquarters here, Lam repeatedly brings the conversation back to the principles and values that guide his company. Instilling a culture and mission throughout the organization is his favorite part of the business, he says.

Although DCH has existed since the late 1940s (the corporate parent since the 1920s) the company waited until 1997 to develop a formalized mission statement and set of core values.

“We had a long tradition and an established culture, but it wasn't spelled out,” Lam says. “As we expanded, we felt we needed to establish a more formal doctrine and set of guidelines.”

Lam asked the employees to identify what the company's cultural values were. Senior managers finalized a mission statement based on those values.

The statement, prominently displayed in the DCH offices and on its website reads: “To be an innovative industry leader totally committed to customer satisfaction, employee satisfaction, integrity and teamwork.”

“I think it's a formula for success in all types of businesses,” Lam says. “Long-term success relies heavily on a company's reputation.”

He cares deeply about the company's reputation and is proud of all of the manufacturer and J.D. Power awards it has earned through the years.

There have been some bumps in the road. DCH endured a troubling lawsuit when the New Jersey's Attorney General filed 13 complaints through the Division of Consumer Affairs (DCA), claiming the dealer group had engaged in fraudulent behavior.

“It was a miscommunication between our company and the DCA,” Lam says, producing a letter from the attorney general proving it. In addition to the customary language of no admission of wrongdoing, the letter says there was no finding of guilt. It also exonerates DCH and praises the company for providing a high level of “contact, cooperation and access” to resolve the issue.

The mission statement drives everything the company does today – not just in how employees treat customers but also in how the company treats its 2,500 employees.

Lam credits the Saturn brand with providing some of the inspiration to focus on formalizing the culture.

“We were one of the first groups to open a Saturn store,” says Lam. “We learned a lot from them in how to establish a culture in the dealership.”

The company's leadership went to Orlando and stayed at the Mission Inn – “a coincidence,” laughs Lam – to work on team-building exercises.

“We call it TEAM-DCH,” Lam says. It stands for trust, excellence, attitude, mutual respect, dedication, communication and honesty, he says.

“These are more than platitudes for the company. They are concepts that are driven into the mind set of each employee to the point that living and working by them becomes second nature.

“We can accomplish so much more in a much shorter time by being a team,” says Lam. “Yet making sure each department in the dealership is on the same page is the hardest part about this business. That is why we focus on it so much.”

Innovation also is important, and Lam believes it helps differentiate DCH.

DCH regularly holds roundtables for department managers from its various dealerships. The managers share ideas and solutions that have worked for them.

Managers tend to take ownership of ideas they generate, which works better than having a general manager come back from a 20- group meeting with several ideas and telling department managers to implement them, Lam says.

The group also fosters a culture of innovation with a formal quarterly program that recognizes and financially rewards employees who come up with the best new ideas that better the business. Each new idea is assigned a manager to sponsor it.

DCH not only uses internal staff to train all of its employees, it brings in outside facilitators to help with the education. “We want ideas from within and outside,” Lam says.

Much of the underlying vision for DCH came from Lam's father, B.Y. Lam, whose motto was, “Customers are supreme and servicing them takes top priority.”

DCH dates back eight decades to when the elder Lam and partners established a trading company in Shanghai and later added a branch and a bank in Hong Kong. The elder Lam was affectionately known as “Big Brother” because of the way he treated customers and employees. It was an example and a heritage his son would never forget.

The son's childhood years were far from safe. He was born into the political maelstrom that was the British-controlled city of Hong Kong on September 19, 1941.

Not long after, his family fled an oncoming Japanese invasion. For the duration of the war, family members settled in Macau, a small city on the southern coast of China. For the next three-and-a-half years, Japan controlled Hong Kong.

Following the war, the family returned to Hong Kong, while Lam's father traveled to New York City to establish an American subsidiary for DCH. The company specialized in importing textiles and food. In 1949, three years after starting the division, Lam's father died of a stroke in Hong Kong.

The company survived and thrived for the next several years because of a strong succession plan put in place by the elder Lam.

Even at age 63, Shau-wai Lam clearly is moved by the example his father set, saying how he believes his father would be proud of what the company has accomplished.

Lam's father-in-law also provided inspiration. Ironically, during his interview with Ward's, Lam received a call from his wife, Marie, informing him her father had died in Hong Kong.

Displaying grace and poise, Lam spoke of how his father-in-law was one of Hong Kong's premier cancer specialists.

At age 18, Lam moved to the U.S., earning undergraduate and graduate degrees in mathematics from Purdue University, after which he also earned a masters in business administration from New York University.

He recalls the culture shock of moving from a big city such as Hong Kong to a Midwest American university surrounded by cornfields.

Lam is quick to say he has not experienced any discrimination here.

More often than not, Lam feels the perception of discrimination is caused by misunderstanding when two cultures meet.

As a result, he spends time and money promoting museum programs and events to enhance the cultural exchange between China and the U.S.

After finishing his education at NYU, Lam joined DCH as a junior executive in 1967, working for 10 years in the international food and textiles trade.

By the mid-1970s, profits margins were declining, and DCH management began looking at other alternatives.

Automotive was an easy choice. The parent company enjoyed success with an automotive distributorship it had acquired in Hong Kong in the late 1950s. It served several brands and provided the contacts to get started.

“We saw automotive as an industry with a lot of growth potential,” Lam says. “Cars are one of the essential products.”

Also, the automotive-retailing-franchise system was attractive to DCH.

“The barriers to entry were high, and we realized that would give us some measure of security,” says Lam. “The competition can be severe, but it is relatively orderly and rational.

It sounded easy, but DCH was years ahead of the automotive retail industry. Corporations just did not own dealerships in the 1970s and 1980s.

None of the U.S. domestic brands was willing to provide franchises to the company, but Honda Motor Co. Ltd. was willing to work with DCH. Honda, at the time, was a burgeoning Japanese brand in the West and the South.

Honda offered an open point in New Jersey, and in 1977 DCH opened its first dealership, Paramus Honda.

Soon DCH was looking for more dealerships. The company learned of a potential point in Gardena, CA, and began asking about it. Honda refused to make any promises and made DCH go through the application process.

It just so happened the best location in Gardena became available when a Chrysler dealership moved to another town.

DCH decided to take a risk and bought the property before it knew it had the franchise license. “It was worth the gamble,” Lam says. “With us having a location already, it would be harder to say no to us.”

DCH sent Lam to Los Angeles to establish a beachhead there with the opening of Gardena Honda. Lam embraced the challenge, moving his family across the country. “I was the youngest executive,” he says modestly. “I went where they needed me.”

Gardena Honda opened in 1979. Within four years, it became No.1 in the country. In 1986, the company opened Tustin Acura in California, which also became the nation's No.1 Acura store in its first year of operation. “We were fortunate to have the holding company first,” Lam says. “Today, most dealers form holding companies long after their dealerships have been in business.

“We already had the culture in place, so it was easy for us to grow and implement the philosophy and structure as we added stores.”

Lam, who at the time knew little about selling cars, had to make smart hires.

“I learned the business by hiring some good people and specialists in the industry,” he says.

Still, it was not easy at the time trying to recruit people to work for a Chinese company in the U.S.

“People were apprehensive at first,” Lam admits. “I had to do my best to convince them to try us out. But we quickly developed a reputation for treating everyone with dignity and respect. People like working for a company like that.”

In 1988, after the company president died, management summoned Lam back to New York to take the helm.

By 1990, the founders of the company, were into their 90s. And there was uncertainty, with Hong Kong scheduled to be turned over to the People's Republic of China in 1997.

The shareholders sold the company in 1991. In 1992, the Lam family and another family in Hong Kong led a buyout of the American subsidiary, which by then was focused solely on automotive.

Each interest now owns 46%, after DCH contributed 8% to establish an employee stock option plan (ESOP) last year.

“We didn't want to go public, nor did we want to partner with a venture capitalist,” Lam says. “It's our first attempt. If it works well as planned, we can expand it.”

DCH's employee benefits help to create and foster a culture of teamwork. “The commitment starts at the top,” Lam says. “Management has to show it is serious about teamwork for employees to buy into it.”

Unlike most companies, where employees become fully vested in their retirement plans after five years, DCH employees are fully vested in the company's employee stock option plan (ESOP) after one year. “We feel by then, they have made a commitment to us to be part of the DCH family,” says Lam. “By doing this, we want them to experience the benefits of being part of the family.”

DCH matches employee donations to their 401k plans dollar-for-dollar for the first 3% invested. The next 2%, DCH matches 50 cents for each dollar invested by the employee. The matches are done with company stock.

Lam believes it is critical for his company to lead the employees in establishing a culture of trust. “Ultimately, there is a moment of truth, where we have to demonstrate that we as management will walk the talk,” Lam says.

DCH did just that a few years ago when a medical insurance program provided by the New Jersey Dealers Assn. went bankrupt. There was not enough money to cover insurance for dealership employees.

DCH immediately purchased double coverage for its employees and promised to provide legal defense for any employee whom health services went after for payment. If the employee lost, DCH would pay for all of the liabilities.

“It was a big undertaking for us,” Lam says. “We really didn't know what all of the liabilities would be. But we demonstrated that we really mean what we say about commitment to customer satisfaction.”

DCH shows its generosity in other ways. It recently gave $270,000 to a National Automobile Dealers Assn. charitable foundation, the most from any dealer group.

All the stores must give a certain percentage of their earnings to charity. If they do not, the parent company will do it for them, and debit their account.

DCH now has grown to 32 dealerships with 37 franchises. It is not easy to add dealerships, Lam says. But having a culture already in place makes it easier for DCH to implement its philosophy and structure at the point of acquisition.

Once an acquisition is completed, the human resources department begins integrating employees of the new dealership into the DCH family.

Lam says: “We train our employees to always do the right thing.”

DCH Automotive Group's Dealership Portfolio
California
Downey Acura Norm Reeves Acura Temecula
Tustin Acura Norm Reeves Honda Temecula
Gardenia Honda Norm Reeves Chrysler, Temecula
Lexus of Oxnard Norm Reeves Dodge, Temecula
Nissan of Buena Park Norm Reeves Jeep, Temecula
Toyota of Oxnard Norm Reeves Hyundai, Temecula
Toyota of Simi Valley Norm Reeves Subaru, Temecula
New Jersey
Montclair Acura Freehold Toyota, Freehold
Essex BMW, Bloomfield Freehold Nissan, Freehold
Academy Honda, Old Bridge Montclair Jaguar
Kay Honda, Eatontown Montclair Lincoln Mercury
Paramus Honda Montclair Volvo
DCH Audi, Maplewood Saturn of Brunswick
DCH Volkswagen, Maplewood Saturn of Eatontown
Brunswick Toyota, Brunswick Saturn of Freehold
New York
Saturn of Massapequa Wappingers Falls Toyota
Saturn of Medford Wappingers Falls Subaru
Saturn of Hicksville

cbanks@primediabusiness.com